Bear Stearns bails out hedge fund

Bear Stearns Cos. Inc. on Friday said it will provide up to $3.2 billion in financing for a struggling hedge fund it manages, but sources said a second fund is still working out a restructuring plan with creditors.

The move should stabilize one of a pair of funds whose difficulties have roiled credit markets and pulled down Bear’s share price.

Bear said it provided secured financing to the High Grade Structured Credit Strategies Fund, which, according to a source familiar with the matter, was down about 5 percent through April.

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The financing will eliminate exposure that banks including Citigroup and Barclays Plc had to the fund, sources said.

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A sister fund, High Grade Structured Credit Strategies Enhanced Leverage Fund, was down 23 percent for the year by the end of April. Bear Stearns is still trying to negotiate a recapitalization for that fund, sources said.

At their peak, the two funds controlled more than $20 billion of assets